Explore BrainMass

Explore BrainMass

    Return on stocks, bonds & preferred stock

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    1. Suppose a stock had an initial price of $84 per share, paid a dividend of $2.25 per share during the year, and had an ending share price of $92. What was the dividend yield? What was the capital gains yield? What was the total return?
    2. You bought one of Acme Corporation's 8 percent coupon bonds one year ago for $960.00. These bonds make annual payments and mature 5 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 7.4%. If the inflation rate was 3.4% over the past year,,what would be your total real return on investment?
    3. You bought a share of 8.5% preferred stock for $103.00 last year. The market price for your stock is now $98.50. What is your total return for last year?
    4. A stock has an expected return of 12 percent, its beta is 1.3, and the risk-free rate is 4 percent. What must the expected return on the market be?

    © BrainMass Inc. brainmass.com June 3, 2020, 5:14 pm ad1c9bdddf
    https://brainmass.com/business/finance/return-stocks-bonds-preferred-stock-19265

    Attachments

    Solution Preview

    See attached files.

    1. Suppose a stock had an initial price of $84 per share, paid a dividend of $2.25 per share during the year, and had an ending share price of $92. What was the dividend yield? What was the capital gains yield? What was the total return?
    Initial price= $84.00
    Dividend= $2.25
    Ending price= $92.00

    Dividend yield= 2.68% =2.25/84
    Capital gains yield= 9.52% =(92-84)/84
    Total return= 12.20% =(2.25+(92-84))/84

    Answer:
    Dividend yield= 2.68%
    Capital gains yield= 9.52%
    Total return= 12.20%

    2. You bought one of Acme Corporation's 8 percent coupon bonds one year ago for $960.00. These bonds make annual payments and mature 5 years from now. Suppose you decide to sell your bonds today, when the required return on the ...

    Solution Summary

    The solution provides answers to 4 questions on returns on stocks, bonds, preferred stock and market.

    $2.19

    ADVERTISEMENT